The auto-enrolment system must be adapted to allow First Time Buyers access their fund to get on the housing ladder

[Brendan Burgess]

I issued this press statement just now.

Brendan Burgess the founder of the Consumer Forum, Askaboutmoney.com welcomed the launch of an auto-enrolment scheme, but the biggest problem facing young people today is the affordability of housing. These pension must be adapted to accommodate this.
Here is the summary of the submission I made to the public consultation over two years ago. It is even more relevant today.

Summary suggestion
Those people in their 20s who think about the future, do not think about pensions. They think about how they might get on the housing ladder.
Living rent-free in retirement should be the individual’s priority and it should also be the state’s priority for the individual.
Home buyers must be allowed to use part or all of their pension fund to help them buy a home.

• · This would make the proposed auto-enrolment system more acceptable
• · It would reduce the amount of people opting out
• It would not force young people to prioritise a pension over buying their own home
• They would maximise their contributions to their pension fund
• They would never stop contributing to their pension fund

Brendan Burgess

 

[Paul O Mahoney]

I issued this press statement just now.

Brendan Burgess the founder of the Consumer Forum, Askaboutmoney.com welcomed the launch of an auto-enrolment scheme, but the biggest problem facing young people today is the affordability of housing. These pension must be adapted to accommodate this.
Here is the summary of the submission I made to the public consultation over two years ago. It is even more relevant today.

Summary suggestion
Those people in their 20s who think about the future, do not think about pensions. They think about how they might get on the housing ladder.
Living rent-free in retirement should be the individual’s priority and it should also be the state’s priority for the individual.
Home buyers must be allowed to use part or all of their pension fund to help them buy a home.

• · This would make the proposed auto-enrolment system more acceptable
• · It would reduce the amount of people opting out
• It would not force young people to prioritise a pension over buying their own home
• They would maximise their contributions to their pension fund
• They would never stop contributing to their pension fund

Brendan Burgess

While I can see the benefits of the above if a young person, ie under 35 in my view were to encash a portion of their pension, wouldn't they have to pay tax on that withdrawal?

And in some cases they may have gotten tax relief at 20% but due to career progression be in the higher bracket and may then have a liability higher than the initial tax benefit.

If this were to happen you can imagine the outcry by those who didn't fully understand the ramifications.

Having said that I think anything that encourages young people to provide for their future has to be a good thing, but I can't see the Government forgoing their piece.

 

[Brendan Burgess]

Hi Paul

I attach my full submission.

There are a few ways of doing it.

1) You could let someone just take their money out and suffer tax on it at 20%.
2) You could treat the withdrawal as an advance on the 25% tax-free lump sum on retirement.
3) You could leave the pension fund intact but let the pension fund lend the deposit to the owner.

It's the principle which is important.

People should save for the long-term.
Buying a home is saving for the long-term.
It takes priority over pension provision where you can't afford to do both.

Brendan

 

[Brendan Burgess]

From the Design Principles FAQ

11. Can I access the money early if I need it, for example for a house deposit?

The only circumstances that are being considered in terms of early access to pension
savings is in relation to enforced workplace retirement due to ill health. Early access to
funds is not generally a feature of retirement savings systems currently, either in Ireland
or internationally. The underlying principle is that savings should be ‘locked away’ until
retirement. To do otherwise would likely have detrimental impacts on pension pots and
completely undermine the overall objectives of the system.

 

[Brendan Burgess]

The Indo has a story today



A confidential Cabinet memo prepared for ministers states that the new pension scheme will be “particularly important” as home-ownership rates are in decline and an increasing number of older people need enough income to meet the cost of rent during their retirement.

“An increasing number of older people will need sufficient income to meet rental costs during their retirement years,” the memo states. “The expansion of pension coverage is key to addressing this challenge.”

This is so frustrating.

It does not matter how good the auto-enrolment system is. Someone who reaches 65 and is still renting will be very vulnerable financially and will have no security of tenure.

If someone owns their own home mortgage-free, they can get by on the state pension.

Brendan